Suzano SA Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Daniel Sasson - Itau BBA - Analyst : My first question for Beto or Marcos. I'd like to hear your thoughts on the new administration in the US taking more protectionist measures. We've seen some news out this week on the steel and aluminum industries. Does that change at all your growth strategy in the country or the attractiveness of new potential ventures or M&A activity in the country? Do you expect any sort of tariffs related to the pulp and paper sectors? So just wondering how that changes, the new government change -- if the new government changes anything in terms of your capital allocation decisions in the country? And my second question, maybe to Leo. Leo, just to confirm, you said that the capacity that left the market in China has translated in 200,000 tons of additional demand per month, right, from these nonintegrated players that are basically taking over the room left in the market. Do you have any views or can you update us on the current situation of that specific player or the current market situation, if you think this is something more temporary and that should revert at some point? Or if do you think that this could actually become more structural in the market? And if you're feeling comfortable enough with your inventory levels that you said were -- or ended the year at low levels, if we should think about a recomposition of inventories throughout 2025?

Question: Leonardo Correa - BTG Pactual - Analyst : Okay. So a couple of things on my side. The first one on the cash cost. Aires, I remember the third quarter, you said that you were expecting the cash cost number for 2025 to reduce about low double digits from the level in the third quarter, right, which was about BRL816. So at the time, we were thinking something -- assuming that math, we were thinking something in the range of, let's say, BRL770, BRL780 per ton as a pulp cash cost. Now to see if I understood exactly what the new, let's say, the revised guidance is, you're indicating that the levels in the first quarter for cash cost will increase a bit given some maintenance stoppages. And for the year, for the full 2025, you're expecting pulp cash cost to be on average flattish versus the fourth quarter, which is about BRL800 per ton. So basically, over these months, we're seeing a small creep up in, let's say, the official guidance for Suzano from, let's say, BRL770, BRL780 to about BRL800 based on the relevant changes in parameters over the period. So I just wanted to double-check with you if my understanding is correct or if I'm missing something. And my second question for Marcos. Again, Marcos, I mean, the level of free cash flow generation is quite substantial, right? There still is a bit of growth CapEx in the numbers. If you look at it on a maintenance perspective, I mean, the free cash flow yield is even higher, right? I mean we're talking about relevant numbers. At the same time, you stopped buying back shares, right, I think, over the past months, given the share price appreciation. Suzano stock continues trading at very de-rated levels versus global peers, right? I mean we're seeing something which seems a bit dysfunctional or it seems abnormal to see Suzano trading at the lowest multiple in the entire coverage universe, thinking regionally and thinking globally. So I just wanted to pick your brains a bit on -- I mean, how are you thinking this de-rating? How are you thinking buybacks in this context of still a very de-rated stock where the market seems to be very skeptical on capital allocation going forward? Those are my two questions.

Question: Marcio Farid Filho - JPMorgan - Analyst : I want to follow up on the capital allocation strategy. Obviously, a lot of news recently and I wouldn't ask you to comment on any of the ones that have been ventilated. But I'm just trying to understand if you can provide some details for us. I mean, when you think about the strategy, I wanted to understand, I mean, where the company focus is in terms of grades, in terms of geographies? You mentioned in the previous calls that there is not -- well, in the previous conversations, actually, there is nothing transformational on the pipeline. But given just the recent headlines, I wanted to understand what do you consider as a concept, transformational and not? And again, how should we think about focus in terms of geographies and grades as well when you think about downstream? And also a follow-up on the deleverage side, Marcos, I remember at least on -- your predecessor used to talk about $800 per ton as kind of a target for leverage. That would imply around $11.5 billion of net debt today. Is that still the target? There has been any change in terms of that understanding on where you want to be in terms of balance sheet leverage?

Question: Rafael Barcellos - Bradesco BBI - Analyst : My first question is about Ribas operations. So I just wanted to understand if you have already identified any debottlenecking opportunities in the asset. If not, when you'll be able to have more visibility on that? And other than that, I mean, how do you see its cost evolution and whether there's any other opportunities to improve its performance, okay? And then my second question, just a follow-up on the capital allocation. So I know that you released your M&A guidelines during Suzano Day, but I just wanted to better understand which business line you have referenced, right? I mean Suzano has now a packaging operation in the US, so whether Suzano should focus more on the packaging side or really be open to other opportunities in tissue or even pulp? So I just wanted to understand in more detail which type of business you would prefer?

Question: Caio Ribeiro - Bank of America - Analyst : So my first question is on the CapEx front. One of the constant debates that we have here is which line items from the CapEx guidance are recurring, which ones are not in the sense that every year, there are line items related to land and forest acquisitions and expansion and modernization of facilities. So I wanted to ask you, I mean, how should we think about this going forward, right? And also, what effect should Cerrado have on the level of maintenance CapEx of the company over the coming years? And then secondly, on the capital allocation theme, as you assess opportunities for growth ahead, would you consider another pulp expansion, right, particularly if the opportunity arises to acquire a significant amount of forestry assets from one player in locations where you already have existing infrastructure and logistics?

Question: Alfonso Salazar - Scotiabank - Analyst : Excellent. The question that I have is regarding China. And from a geographical standpoint and well, considering China situation and the risk of a trade war, the situation in Europe, where do you see growth opportunities thinking not in the next two or three years, but five or even longer term? Because I want to understand where the pulp demand is going to be strong in the next decade in case there is a stagnant market in China or a weakening market in China? Where do you see pulp demand coming from? That would be my question.

Question: Lucas Laghi - XP Inc. - Analyst : Congratulations on the results. We have two questions from our side. I mean, first one regarding your FX hedging strategy, but we noticed a higher strike of the -- like the zero-cost collar options for 3Q '26 onwards, right, with the strikes of the puts even above the current BRLlevels. But if you could remind us of the rationale behind your hedging strategy, especially the range of the 40% to 75% of the hedge exceeding dollars? And if it makes sense to assume that Suzano will remain at the high end of this hedging range in the upcoming quarters given this volatile FX environment? And the second question, I mean, you mentioned the renegotiations on the contracts related to Pactiv's acquired assets. How should we think of the financial improvement of these operations going forward? I mean, should we already see a significant improvement in first Q '25? Or should it be more gradual throughout the year?

Question: Ricardo Monegaglia Neto - Safra - Analyst : I have two quick ones. So first -- I think both to Leo. How do you see consumers' pulp inventories today? Do you think they are prone to restock in the near future or there are any factors that could prevent such move? And my second question is on wood chip prices. Are you optimistic on price inflation in the near future? Do you think that supply -- do you see any difference or change in supply that could stimulate such movement?